The Shrinking Middle (Tradecraft)

Wizards of the Coast announced something today that Magic players will likely never hear about. On December 29th, they'll reduce the discount for Magic product by 2%, increasing our costs by 4%. They're not raising prices, they're just reducing the discount, meaning retailers will pay more, but will sell for the same price. How much more? I estimate $3,000-$8,000 a year, from each store, will just evaporate from retailer coffers. WOTC costs have been steadily rising for us in the form of shipping surcharges, but this is the first time the discount has been changed since 2009.

The reasons for shrinking margins is the usual stated added increases in costs of doing business that every reduced margin publisher provides us, be it Wiz Kids, Paizo or the myriad of others. Often those programs disappear or are entirely forgotten, while the shrunken margin remains. Even when they still exist, what other industry adds the cost of their doing business to their retailers?

In the case of Wizards, they have not raised prices on Magic since 2006, when packs went from $3.69 to $3.99. Using an inflation calculator, the price for a Magic booster, keeping up with inflation, should be $4.71 right now. So why not raise the MSRP?

It doesn't need to go up a buck, but even a quarter is well within what they need to cover their increased costs. More than likely, this is because Wizards of the Coast doesn't want to risk upsetting their customer base. When you've got a golden goose, you don't change its feed. But retailers? Whadda they gonna do about it? Nothing, that's what. We lack our own trade organization and an after hours email saying you've just lost $2,000-$8,000 next year is not an unusual occurrence.

As I've mentioned many times, with both an MSRP system and a discount structure, there is no way for game stores to cope with rising costs. When our costs go up, we can't raise prices, so we find a way to eat it, and that way is usually less staff, poorer infrastructure, and cost cuts in uncomfortable areas, from toilet paper quality to how often we clean the carpets. It makes the game trade a backwater, an inflexible business model that is inherently down market. Publishers then scoff at us and our operation, a model of their own making. It would be nice if the 500 pound gorilla in the industry was at least more understanding of our plight. 

Gamers and Gates

On Fridays, if I'm lucky, I go to the rifle range and shoot holes in circles. It's a relaxing thing I like to do and it's a kind of reward, a conceit, after a decade of running a successful business. It's my golf. There is tremendous guilt in this time away, but that's another story. I mention this because you will never see a more polite group of miscreants as the fine ladies and gentlemen of the rifle range.

Why? Mostly because they all have guns. That tends to engender politeness, despite what you might have been told. When there's yelling, it's because there's a violation of safety. I was yelled at last week for not noticing someone else's safety violation. It takes a village.

They also have a common cause. They're all members of a maligned sub culture. They have vastly, wildly divergent views on politics, religion, the way of the world, but they all agree on one thing. They all want to continue to punch holes in paper circles, and much of the world disagrees.

I mention this because gamers are also members of a maligned subculture. Sure, the video game market is literally 100 times larger than the hobby game market, but any attempt to distance myself from video gamers ends up with me throwing stones within my glass house.

Their games are violent. Check. They're a black hole of time. Check. It's predominantly a male pursuit with difficulty integrating women. Check. My male dominated murder hoboism, AKA my D&D group, meets all standards for which I dislike vidya games. There are great, beautiful, creative, and non violent themes in both genres, and we all strive towards those examples, but the criticisms, the examples of what's normative in the sub cultures, are mostly the same.

The one saving grace of hobby gaming sub culture, one difference from video game culture, is eventually, hopefully, we'll meet face to face. It's social gaming. We're not all holding guns to engender politeness, but we still get along well enough to kill the monsters and take their stuff. Yes, our online forums are just as virulent as the video game forums, but have you ever been on a firearms forum?

Oh geez, the amount of time people spend trying to convince you that one, one-hundredth of an inch is vitally critical to your survival is just staggering. Arguments get just as heated, although there's very rarely threats of violence for obvious reasons. There is no deterrence in gaming forums.

Without a social outlet, video gamers have no social consequences to their douchebaggery, no deterrence. There is no convention or game store where they'll have to encounter each other and reconcile their differences. There's no rifle range of politeness.

I'm not a solutions guy, but if I had to guess, it would be more accountability and zero tolerance. More walled gardens and less Wild West. But I've got my hands full over here, trying to get my own hobby game house in order. Our basic guideline of Don't Be a Dick, Wheaton's Law, tends to work pretty well for us.

Fill Rates (Tradecraft)

Here's a little experiment. I'm taking my top 30 board games, which excludes expansions and card games, and checking availability from the largest three distributors at my local, West Coast warehouses. Over a quarter of this list includes Alliance exclusives (marked with an "x" for distributors that can't get those games), which pretty much guarantees I'll be shopping with Alliance. Lets look at the fill rates with these games, with Alliance being judged with their exclusives included. The other two distributors get a pass on those games.

Description	ACD	Alliance	GTS
Pandemic: New Edition	x	Y	x
Betrayal at House on the Hill	N	N	N
Settlers of Catan Rev.	x	Y	x
King of Tokyo	Y	Y	Y
Small World	x	Y	x
Ticket to Ride	x	Y	x
Forbidden Desert	Y	Y	Y
Smash Up	N	Y	Y
Robinson Crusoe	x	Y	x
Descent Journeys in the Dark 2E	Y	Y	Y
Firefly: The Board Game	Y	N	Y
Takenoko	N	N	N
Arkham Horror	Y	Y	Y
7 Wonders	Y	Y	Y
Carcassonne	x	N	x
Zombicide	N	N	Y
Lords of Waterdeep	Y	Y	Y
Castle Panic	Y	Y	Y
Star Wars X-wing	N	Y	Y
Super Dungeon Explore	N	Y	Y
Red Dragon Inn	Y	Y	Y
Elder Sign	Y	Y	Y
Krosmaster: Arena	Y	N	Y
Rampage	N	N	Y
Shadows Over Camelot	x	N	x
Agricola	x	Y	x
Cosmic Encounter	Y	N	Y
A Game Of Thrones	Y	Y	Y
Mansions of Madness	N	N	Y
Mice and Mystics	Y	Y	Y
Total	22	30	22
Available	14	20	20
Fill Rate Percentage	63.6	66.7	90.9

Tradecraft: Problems You (Want/Don't Want) To Have

The new issue of ICV2 put the current game trade problems into context (the article isn't online yet). The game trade is booming. It has been booming for years now, but this year is one of the best in recent memory. Product availability, however, is poor. What am I talking about? The hottest games of the year, Marvel Dice Masters and X-Wing are gone. The D&D 5 Player's Handbook and the Pathfinder Advanced Class Guide are missing from our shelves. Board game mainstays like Betrayal at the House on the Hill and Carcassonne are gone, and worse, the new games, the ones we would like to build on, have disappeared without a trace in fire and forget fashion.

So who is at fault for this? Nobody. Everybody.  Retailers are told to order deeper. Publishers are either frustrated or elated by this increased demand. Some will call a sell out a victory, while others are seriously concerned with satisfying the market. If you're at a bake sale and you sell all your cookies, that's a clear win. You have the money and no need to take perishable cookies home.  If you're the guy in charge of selling the cookies, you're frustrated that you won't be taking in any more cookie money.

That's where retailers are right now. No more cookie money. The hottest games of the year are worth nothing to us if we can't put them on the shelves. We can't even call them hot, really, because we don't know the depth of the demand. Being the last man standing when it comes to inventory is great, but it doesn't build your confidence in a product line. There is a sense of a "ceiling of success" when there's a supply ceiling that can't satisfy demand. It's not greed, but a perceived limit to what's possible with hard work.

Will the next Dice Masters or X-Wing release be hot? Who knows? Some say Dice Masters is done. Some have massive pre-orders in. Not only do we not know our own depths of demand, but the lack of product overall perverts the local market, driving people to our store to suck up the last dice pack or space ship. When supply is plentiful, those people are not our customers. So without a way to plumb the depths, we're reluctant to take chances, to dive deep, on the next release, which means pre-orders are low, and the process repeats itself. Madness.

The next problem is organized play. If we were online retailers, no big deal. Sell whatcha got, blow it out or speculate, wash rinse repeat. In the case of game stores, publishers are expecting us to provide the value adds that we do so well, what differentiates us from everyone else. They want us to run organized play for their games, but think about that. Why would I run organized play for Dice Masters or X-Wing when I can't sell the product? Out of a sense of charity? Our customers certainly want that. So now we're in a jammed up position of wanting to satisfy customers, but not having financial incentive to do so.

There are bright spots of course. Besides miniature games, which generally have it together this year, there's Magic. Oh Magic, you savior of stores. We would run Magic events every day of the week, if we could. Wizards of the Coast almost always has supply. They provide wonderful organized play. The judges have it together. In fact, it's so easy right now, there's talk of game store blight, too many craptastic Magic only store stinking up the market and offering very little to their local communities. We're always lecturing them on diversification, but it's hard when the rest of the trade can't get their supply and demand formulas right.

So times are good, very good. Success is limited by the supply of products. I find it hard to blame anyone really. We're ordering what we think we need. They're making what seems a reasonable amount. Demand is outstripping supply. Future demand is hard to divine. If we could all just crack the code, there could be success at a much higher level. That potential is what's frustrating to retailers. Just don't call it a win.

Customized Service at Commoditized Prices

“All of us as consumers have gotten spoiled... We expect customized goods and services at commodity prices.  -Robert Rubin

This sums up modern retail quite well. We want things now, we want them exceptional, and we want them cheap. For the most part, you can have that. It comes in two flavors. The first flavor is mega corporation, because the only way to get this result is economies of scale, cutting out fat, as Robert Rubin goes on to say.

This is your Wal Mart, Target and Amazon. We expect these companies to be cheap, and they are. They can do this by squeezing their suppliers, paying their staff less, buying in bulk at reduced prices, using technology to increase efficiency, or in the case of Amazon, not making any money at all, much to the chagrin of their shareholders.

The second way retail addresses this is specialty retail. That's me! Specialty retail is about taking a small niche and hand serving a tiny customer base with customized goods and services. Customized goods and services means you can come to me needing a board game for an eight year old boy who likes trains and I can hand pick you a suitable game at a satisfactory price point in no time. Eight people can come to a miniatures event and pay $5 for store credit and we'll call that a win because of a complex ancillary micro sales model.

That's a niche I can fill that the mega corporation won't touch because of its fiddly complex nature and impossible to scale efficiencies. I do it by being small and nimble and having no fat whatsoever. We also have some big box characteristics, and despite the low tech nature of what we sell, we're extremely dependent on technology and sophisticated inventory processes.

There are reasons for more for less, but it would be wrong to claim it's all tech or pressuring suppliers. The way we've all been able to get customized goods and services and commoditized prices is almost entirely worker productivity. Our employees are pretty amazing, expected to master five times the tasks of a McDonald's employee for not a lot more money. That's been the trend over the years, expecting massive productivity increases, bit by bit, often a fraction of a percent in a quarter, but over many years.

The demand for more, better, right now at a low price has resulted in staggeringly high employee productivity. With unemployment falling, there's a concern in some quarters about increased inflation. However, the concern comes from an outdated concept that doesn't take into account the levels we've squeezed out productivity from today's workers. When employees are 50% more productive than they were just a short while ago, you can pay them more without feeling the pinch to the bottom line, which means inflation shouldn't rise. So we demand more with less, while we complain about income inequality, the shrinking middle class, and stagnant wages.

I am no exception here. One thing I tell my managers is if they can get through school, with the experience they're getting working for us, they'll be golden. Why? Because they work really damn hard, smart, and fast. Anyone who can master that in my employ is destined for success with a degree in hand.